April 18th, 2019

Legal Talk 13: How to Handle Legal Action
 
You call me in a panic. You’ve been scrolling through talks on taking legal action against infringers, but now you're worried about what might happen if someone decides to take legal action against you.

Okay. So, having someone take legal action against you is a bit traumatic. Sometimes lawyers do horrible things like deliberately send you a letter on a Friday night so as to mess up your weekend. Initial reaction in my experience is fight or flight. Clients either want to write straight back and tell the writing party where to go or they’re so spooked that they are prepared to submit to the complainant's demands at almost any cost. Neither approach is ideal, especially given that threatening letters usually give you at least 7 days within which to reply, in which case you don't have to do anything straight away.

So, first step: calm down. Talk to your friends about it. A problem shared, is a problem halved.

Second step: don't be scared or ashamed. There are thousands of lawyers who make a living out of writing thousands of threatening letters to people every day. Your letter is just one of many that will be written that day.

There are a number of tactics that you can use when someone claims against you. It really depends upon the claim but here are some tips: 

1. Insurance: When you set up a business you can often get insurance for any claims that are made against you. So, check to see if any insurance that you have in place might be able to help. Sometimes this covers initial legal advice (or full legal protections).  For more information on insurance in this area, I think this link is really helpful: https://www.lawdonut.co.uk/business/contracts-disputes/going-to-court/insurance-against-legal-claims.

2. Analysis: You can do a quick analysis (maybe with the help of your lawyer) and see if you are really breaching someone's rights. Sometimes you can see from the outset what the other party is really concerned about and if it is not too much trouble for you to change things then you might decide to concede.

If you can't really concede (because it would, say, cost too much) then the balancing act can sometimes boil down to: ‘how much is it going to cost me to concede?’ versus ‘how much is it going to cost me to litigate?’ It may be possible to settle with the complainant by paying them some money, thus avoiding litigation altogether. 

3. Money claims: If the other party is claiming money from you then often (but not always), the amount of money claimed is the best-case scenario for the person claiming. Hence, it is often open to negotiation.

Remember that if someone is claiming less than £10,000 from you then it is normally assigned to the Small Claims Court. What this means is that in a claim of less than £10,000, if the other side engages solicitors then the amount it pays to those solicitors in legal fees may start to eat into (or even exceed) the amount it is claiming from you. A party claiming less than £10,000 from you therefore, might want to do a deal to be paid less in return for you paying straight away.

A few tips to avoid these lawyer letters or mitigate the impact include, for example: 

1. Don't Copy: People tend to get annoyed if you copy their stuff. Try to create your own stuff and if you have to copy then make sure that you are allowed to do this. 

2. Clear Contracts: These will limit your legal exposure. A lawyer might charge you for drawing these up but you can use templates quite cheaply from the internet and then just get your lawyer to customise them. Some people try to do all of this themselves. This is a big mistake. Any money saved trying to do a shortcut on this step will, sooner or later, come back to bite you.

3.Clear Process: Some people think that having clear contracts is all you need to do, but where I see problems is where a contract is in place but no one (not even you), is actually adhering to it. So, for example, you let the client pay late or you make changes to the way you operate (but don't even cross reference the contract when making this change). This tends to end up in a bit of a mess. This mess usually comes to the forefront when a customer won't pay you. Everyone then looks at the contract but the problem is that it was signed ages ago and actually it bears no resemblance to what is happening today.

But things change all the time, how can you accommodate all these changes as and when they occur?
 
Yes, I understand. But if it’s too cumbersome to change the contract then at least try to record the change by an exchange of emails and then file those emails with the contract. Then, if there is a problem, at least there is some kind of audit trail as to how things developed. You can even do this electronically. This is much better than just doing things and making changes by agreeing during conversations on the phone. 

4. Register Your Rights: If your IP is registerable or protectable then just get this done (see Legal Chat . If you have registered rights then you can't generally be sued for using your own registered rights. 

5. Get Insurance: You might be able to get insurance relatively inexpensively to cover claims against you. Obviously, it is too late to try to get this insurance when a claim against you or your company is already in the offing, but getting insurance at the start is a wise move.

You say, “What you're saying, in summary, is that if I do get a legal letter then don't panic, then do a commercial weigh up of the costs. Plus, in order to avoid getting into legal hot water I just need to not copy anyone, get some clear contracts in place (customised by a lawyer), police those contracts, register any rights that I think I might have and get some insurance. Is that right?” Yes, nicely summarised. 

You sound much calmer compared to when you first called me.
 
Yours truly

Jimmy Desai
Your Legal Coach
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